Capricorn portfolio endures Covid strain
By Hilary Mare
CAPRICORN Group Limited operating profits were significantly impacted by the Covid-19 pandemic during the last quarter of the financial year, with full-year profit after tax contracting by 15.6 percent to N$856.4 million, the Group’s annual financial results and integrated annual report for the period ending June 30 2020.
Capricorn is a Namibian financial services group listed on the Namibian Stock Exchange (NSX), with diversified operations and business interests in Namibia, Botswana and Zambia.
CEO Thinus Prinsloo last week highlighted that the group’s profit after tax from continuing operations, excluding the Zambian banking operation, amounted to N$1.01 billion, which is 2.2 percent lower than the prior year.
“Overall, Capricorn Group’s response to a challenging year showed resilience and sustainability in our operations and people. We are proud of the performance delivered by our business units and associates. By ensuring the well-being of the business, our employees and clients as a priority during the pandemic, Capricorn Group endured and performed well under extremely challenging conditions. Bank Windhoek, our flagship brand, delivered strong results. Profitability was under pressure in the last three months of the financial year. The significant reduction in Namibia’s repo rate by 225 basis points impacted Bank Windhoek’s profits directly, declining by 9.8 percent compared to last year,” further commented Prinsloo on the results.
Explaining the exclusion of Cavmont Bank from its continuing operations, Jaco Esterhuyse, financial director of the group said: “Following three years of losses reported by the Bank in deteriorating market conditions in Zambia, Capricorn Group accepted the offer by Access Bank Zambia to acquire Cavmont Bank. Agreements for the sale and subsequent merger of the two banks have been concluded subject to the requisite regulatory approvals.”
The Group also noted that it maintained its prudent approach to liquidity management with liquidity continuing to take preference over maximising profits. Following the declaration of the global pandemic Capricorn Group’s liquidity position remained healthy throughout the year as reflected by the 16.2 percent increase in liquid assets.
Gross loans and advances increased by 5.6percent to N$41.1 billion. Bank Windhoek’s gross advances increased by 4.9percent to N$33.4 billion, well above the growth in private sector credit extension of 2.8percent. The growth was mainly in commercial loans. Bank Gaborone increased gross advances by 11.5percent to P4.7 billion as the bank continued to grow its market share, mainly in commercial and mortgage loans
“Asset quality has always been a key focus of the Group. As a consequence of the challenging economic environment, the Group’s total non-performing loans increased by 19.0 percent to N$1.9 billion during the financial year. The group’s non-performing loans (NPL) ratio increased from 4.1 percent to 4.7 percent. Due to the significant increase in provision for expected credit losses the NPL coverage ratio increased from 47.3 percent to 49.0 percent.
“The group remains well capitalised with a total risk-based capital adequacy ratio of 14.8 percent (June 2019: 14.9 percent). This is well above the minimum regulatory capital requirement of 10.0 percent. The strong capital position will stand the group in good stead whilst navigating the perfect storm brought about by the Covid-19 economic shock,” the report states.
On the outlook of the group, Esterhuyse said: “The global economic outlook is bleak with most economies projecting significant contraction. Namibia and Botswana have revised their forecasted contraction in GDP for the current fiscal year to 8.5 percent and 8.9 percent respectively. Unemployment rates are reaching new highs and business closures continue unabatedly, increasing the financial distress of individuals and businesses alike. As a result, we expect an increase in customer defaults with impairment charges remaining high.
“Net interest revenue, especially in the case of Bank Windhoek will be significantly lower in the next year following the aggressive cuts in interest rates. Bank Gaborone is expected to be less impacted and the expected appreciation of the Pula against the Namibia dollar will also contribute positively to earnings. Non-banking subsidiaries are not expected to be negatively impacted and should cushion the overall negative impact on the group’s results.”